We think intelligent long term investing is the way to go. But no-one is immune from buying too high. Zooming in on an example, the Addvalue Technologies Ltd (SGX:A31) share price dropped 59% in the last half decade. That's an unpleasant experience for long term holders. The silver lining is that the stock is up 32% in about a week.
Addvalue Technologies wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade Addvalue Technologies reduced its trailing twelve month revenue by 28% for each year. That's definitely a weaker result than most pre-profit companies report. It seems appropriate, then, that the share price slid about 16% annually during that time. It's fair to say most investors don't like to invest in loss making companies with falling revenue. You'd want to research this company pretty thoroughly before buying, it looks a bit too risky for us.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Addvalue Technologies stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's nice to see that Addvalue Technologies shareholders have received a total shareholder return of 38% over the last year. That certainly beats the loss of about 16% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 6 warning signs for Addvalue Technologies (of which 2 are a bit unpleasant!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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